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Late payment causes 20% of insolvencies, says R3

Late payment by customers for goods and services is a primary or major factor in one-in-five corporate insolvencies, says R3, the insolvency trade body.

A ComRes survey of R3 members also found that 47% of corporate insolvency practitioners had seen at least one instance of late payment being a primary or major factor in a business’ failure in the last year.

Liz Bingham, R3’s president, says: “Even if a business has a great business model and great products and services, it won’t actually be profitable or successful until it gets paid for what it sells. Late payment is a threat that businesses need to take very seriously indeed.

“The late payment problem can have significant knock-on effects within the economy too. The failure of one company can lead to even more unpaid bills and financial problems for others.”

Insolvency practitioners say that the construction sector has by the far the worst record on late payment.

59% of corporate insolvency practitioners said that the construction sector had the worst track record for paying bills on time. 5% of corporate insolvency practitioners identified the wholesale and retail sectors as the worst offenders on late payment; manufacturing, the public sector, and hotels and restaurants were each identified as the worst late-payers by 3% of corporate insolvency practitioners.

Liz Bingham adds: “The construction sector is notorious amongst insolvency practitioners for its late payment problems, which are almost endemic to the sector. Businesses in the sector are also particularly vulnerable to insolvency. Almost every quarter, the construction sector sees the highest number of liquidations.

“A high number of insolvencies and a late payment problem aren’t a coincidence. Action on late payment would result in a healthier construction sector.”

In 2012, one-in-five liquidated companies in England & Wales were in the construction sector.

(Source – R3 Press Release)

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